Good morning and thank you for inviting me to testify today. My name is Adam Hersh and I am an Economist at the Center for American Progress Action Fund.

You have asked me to talk about the role of state-owned enterprises in China’s economy. More than 30 years since beginning economic reform, China’s fundamental economic institutions today are dramatically different than the system of central planning operating during the Mao era. But despite sweeping reforms, government control over China’s economy remains pervasive, including through direct ownership of virtually all of the formal financial system and much of the economy’s productive assets.

The still evolving nexus of political and legal institutions, corporate structures, and economic relationships in China resulting from these reforms is complex and opaque. This has led to several common misconceptions about how China’s economy works. Today I will try to clarify three.